TODAY.AZ / Business

Nabucco pipeline to win political backing Monday

25 June 2006 [13:01] - TODAY.AZ
The pipeline, set to supply gas to Europe directly from the Caspian region, bypassing Russia, is in line with an EU commitment to make the diversification of energy routes a priority after Russia turned off the taps to Ukraine in a row over gas prices in January.

According to Reuters news agency, the $5.8 billion Nabucco pipeline to pump central Asian gas via Turkey to Austria is set to clinch the political support it needs to win over investors at a meeting of ministers and the European Commission on Monday.

The European Union energy chief and ministers of countries crossed by Nabucco, a key plank in European Union plans to diversify its supply away from Russia, have agreed in principle to sign a declaration in Vienna to pave the way for the funding, Austria's Economy Ministry said.

They are taking the step ahead of a G8 summit next month pitting the EU and Russia against each other on energy policy and amid increased Russian lobbying to lure potential investors and customers away from the Nabucco project.

The 25-nation EU made the diversification of energy routes a priority in March after Russia turned off the taps to Ukraine in a row over gas prices in January. The row briefly affected supplies to Europe, which gets a quarter of its gas from Russia.

"There are a couple of issues open regarding the pipeline's financing," an Austrian official said. "The goal is that the governments and the commission... show their support, because the Nabucco consortium partly depends on those countries."

The companies that teamed up for the 3,300 km pipeline -- Austria's OMV, Hungary's MOL, Turkey's BOTA?, Bulgaria's Bulgargaz and Romania's Transgaz -- have yet to give the go-ahead for the pipeline.

Before they proceed they want the commission to grant exemptions to rules that require access to the pipeline to all comers at regulated prices. They want to strike unregulated deals for initial 10- to 20-year supply contracts instead.

A spokesman for EU Energy Commissioner Andris Piebalgs said the commission considered exemptions acceptable in this case.

"Nabucco has been identified as one of the priority projects for the European networks," said the spokesman. "Certain long-term contracts that are normally not allowed under the gas directive could be granted in this case."

Once long-term contracts are in place potential investors and lenders, including the state-owned European Investment Bank and private backers, will have the assurance to commit funds.

Nabucco will supply gas to Europe directly from the Caspian region, notably Azerbaijan, bypassing Russia.

Russian state-owned gas monopoly Gazprom has stepped up opposition to Nabucco, trying to woo Nabucco investors and customers to sign up for an extension of Gazprom's Blue Stream pipeline under the Black Sea to Turkey.

Gazprom and MOL agreed on Wednesday to form a company to study the proposed extension of Blue Stream in a deal that some analysts believe could kill the Nabucco scheme entirely.

The extension would take the gas on from Turkey to Austria and would allow Russia to supply Europe via an alternative to the pipelines that cross Ukraine.



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